Checklist · Your first UK employee
First UK hire: a founder's payroll checklist
Hire number one is where payroll stops being a plan and becomes a legal obligation with dates on it. Here is what has to be in place, in the order it has to happen.
Take the checklist with you
The same checks for an overseas employer, on four printable pages, including what to ask any payroll provider. Free, no email needed.
Download the checklist (PDF, 4 pages)
One question first
Which kind of scheme are you setting up?
A UK company employing someone here registers an ordinary PAYE scheme, and it covers every hire after this one too. A company sitting abroad with no UK entity usually needs either a DPNI scheme, a direct payment scheme in the employee's name, one per person, or, if the company is in the EU, the EEA or Switzerland, an employer-run NI-only scheme in the company's name. If the employee works for a UK business, such as a UK client, that business may have to run PAYE instead. Most of what follows applies either way, but not all of it. The timeline and the figures are written for a UK company, and broadly fit an EU, EEA or Swiss employer on an NI-only scheme, which pays employer's National Insurance too. On a DPNI the registration is different, the scheme is the employee's, and there's usually no employer's National Insurance, so no Employment Allowance and generally no statutory sick pay for you to pay. Not sure which side of that line you are on? The route finder names the scheme in four questions, and our guide to whether you need a UK company covers the reasoning.
Step by step
Two fuller checklists, by where the company is
Pick the one that fits: a company based outside the UK, or a UK small business taking on its first employee.
First UK hire, for an employer based outside the UK
You're a company outside the UK, and someone is about to start working for you here. This is the order to work through it in.
1. Before you make the offer
- ✓ Check they can work in the UK. "You must check that a job applicant is allowed to work for you in the UK before you employ them."
- ✓ Ask whether they hold an A1 or certificate of coverage from another country. Someone working in the UK for an employer in the EU, Gibraltar, Switzerland, Norway, Iceland or Liechtenstein usually pays UK National Insurance, unless they have a certificate of coverage from that country.
- ✓ Find out where in the UK they'll be based. It changes the insurance answer in section 3, because GOV.UK treats someone "based outside of England, Scotland and Wales" differently.
2. Work out the route
Which HMRC scheme fits depends on where your company is based, whether it has any UK presence, and who owes the National Insurance. The usual routes:
- ✓ A DPNI, in the employee's name. HMRC's DPNI guidance includes employees of an overseas employer that has no UK address it pays wages from. The employee sets up a DPNI and pays both their income tax and their employee National Insurance to HMRC under one PAYE reference.
- ✓ An NI-only scheme, in your company's name. When someone works in the UK for an employer based in the EU and UK National Insurance is due, it is due on both sides, the employee's and the employer's, so the scheme is an NI-only scheme in the employer's name and not a DPNI or DCNI. An NI-only scheme deals with National Insurance only, not income tax.
- ✓ Other European employers. An employer based in the EU, Gibraltar, the Isle of Man, Switzerland, Norway, Iceland or Liechtenstein can owe it as well, when the employee works in the UK and UK National Insurance is due.
We'll ask HMRC for the scheme that fits your facts, and once they have the full facts they may suggest a different one.
- ✓ Register in time. A DPNI is the employee's to set up. For a scheme in your company's name: HMRC don't let anyone register a scheme more than two months before they start paying people.
3. From the first day of work
- ✓ Insurance. You must have employers' liability insurance from the day you become an employer, unless the only person you employ is based outside England, Scotland and Wales, and you can be fined £2,500 for every day you're not properly insured.
- ✓ Workplace pension. The workplace pension (auto-enrolment) duties also start on the employee's start date, not when HMRC open the scheme. Staff must be enrolled if they're aged between 22 and State Pension age, earn at least £10,000 a year and normally work in the UK. The declaration of compliance to The Pensions Regulator is due within five months of that start date.
4. Every payday
- ✓ If the scheme isn't open yet. If pay starts before the scheme is in place, payroll still runs every payday and is reported to HMRC late once the scheme exists.
- ✓ On a DPNI: A direct payment scheme doesn't work like an ordinary payroll. HMRC send the employee a deductions working sheet, the employee fills it in, and the tax and National Insurance payments go to HMRC from them. So you pay the gross salary and don't take any UK tax or National Insurance off it.
- ✓ On an NI-only scheme: an FPS on or before every payday, and payment to HMRC by the 22nd of the next tax month (the 19th by cheque).
5. All year
- ✓ Keep the payroll records for 3 years from the end of the tax year they relate to.
- ✓ Diary the year's dates. See our 2026-27 compliance calendar.
General information for an employer based outside the UK, not tax or legal advice. It reflects GOV.UK, HMRC and The Pensions Regulator guidance as saved on 20 October 2026, which can change.
Take the checklist with you
The same checks for an overseas employer, on four printable pages, including what to ask any payroll provider. Free, no email needed.
Download the checklist (PDF, 4 pages)
First employee, for a UK small business
Taking on your first employee is mostly a list of things to do once, in the right order. Here it is.
1. Before they start
- ✓ Check they can work in the UK. "You must check that a job applicant is allowed to work for you in the UK before you employ them." Check the documents with them present, and keep copies with the date you checked.
- ✓ Get employers' liability insurance. You need it as soon as you become an employer, covering at least £5 million, from an authorised insurer. You can be fined £2,500 for every day you're not properly insured.
- ✓ Register as an employer with HMRC. Do it before the first payday, but not more than 2 months before you start paying people. HMRC send your employer PAYE reference by letter.
- ✓ Choose payroll software. HMRC's Basic PAYE Tools is free "for businesses with fewer than 10 employees".
- ✓ Set up a workplace pension. The duty starts as soon as your first member of staff starts working for you.
2. On their first day
- ✓ Give them the principal written statement, with the wider written statement to follow within 2 months.
- ✓ Collect their details: date of birth, gender, full address and start date, plus their P45, or a starter checklist if they don't have a recent P45.
- ✓ Assess them for the pension. You must enrol staff aged between 22 and State Pension age who earn at least £10,000 a year and normally work in the UK.
3. On the first payday
- ✓ Pay at least the minimum wage. From April 2026 that's £12.71 an hour at 21 and over, and the rates change on 1 April every year.
- ✓ Give a payslip on or before payday, showing pay before deductions, the deductions, and pay after them.
- ✓ Send your first FPS. That's how HMRC learn about your new employee: you include their details on an FPS the first time you pay them, sent on or before payday. As a new employer, there's no late filing penalty if your first FPS goes within 30 days of paying someone.
4. After the first payday
- ✓ Pay HMRC by the 22nd of the next tax month (the 19th by cheque). Tax months run from the 6th to the 5th.
- ✓ Pay pension contributions you've taken from pay to the scheme by the 22nd of the next month (19th by cheque).
- ✓ Send your declaration of compliance to The Pensions Regulator within five months of your first employee's start date.
- ✓ Check whether you can claim Employment Allowance. If your company has only one director, they must not be the only employee liable for employer's National Insurance. You claim it on an EPS, once each tax year.
5. From then on
- ✓ Holiday: most workers on a 5-day week must get at least 28 days' paid leave a year.
- ✓ Sick pay: your employee may be eligible for Statutory Sick Pay, paid for up to 28 weeks.
- ✓ Keep payroll records for 3 years from the end of the tax year they relate to.
- ✓ New employer, 120 days. HMRC will close your PAYE scheme if you're a new employer and send no report and no payment in 120 days.
- ✓ Diary the year's dates. See our 2026-27 compliance calendar.
General information for a UK business taking on its first employee, not tax or legal advice. It reflects GOV.UK, HMRC and The Pensions Regulator guidance as saved on 20 October 2026, which can change.
Common questions
Questions first-time employers ask
Do I need a payroll scheme for just one employee?
Yes. There is no headcount below which PAYE stops applying. One employee means a registered scheme, a payslip every pay period, an RTI report to HMRC on or before each payday, and PAYE and National Insurance paid over to HMRC, by the 22nd each month on a UK PAYE scheme (quarterly on a direct payment scheme).
When do the workplace pension duties start?
On the day your first member of staff starts work, not at some later headcount. In 2026/27 a worker aged 22 up to State Pension age earning at least £10,000 a year has to be enrolled automatically, with 8% of qualifying earnings going in and at least 3% of that from you. Staff outside those limits still have rights to join, which is why the assessment happens every pay period rather than once.
Can I pay my first hire as a contractor instead?
Only if the working relationship genuinely is one. Employment status follows the reality of the arrangement, not the label on the invoice, and if HMRC decides the person was an employee, the PAYE and National Insurance are yours to pay. Worth settling before the first payment rather than after it, and our note on off-payroll rules covers the ground.
How long does registration take?
A UK company registering an ordinary PAYE scheme is usually quick. A direct payment scheme is slower, because it cannot be done online, so give it real time. We set out what to expect in how long UK payroll setup takes. Either way, a first payday can still be run and the employee paid while the scheme is being opened, with the filing caught up once HMRC issues the references, so a slow registration does not have to mean an unpaid employee.